In large churches, an entire human resources (HR) department navigates the complex minefield of federal and state labor laws. Most small churches think of HR as an afterthought, or HR responsibilities like hiring, benefits, compliance, and payroll falls to a few people who aren’t properly trained. This can be a pricey mistake. Laws concerning overtime, unlawful termination, and equal rights are just a few areas that trip up churches, big and small, all the time.

Labor laws fill volumes and are quite complex. Plus, labor laws vary from state to state! It gets worse—the government is ramping up efforts to check up on organizations and crack down. The Obama administration has allotted $25 million for the sole purpose of investigating those misclassified as “independent contractors,” hoping to reclaim lost tax revenue.. Be smart. Remember that stiff penalties and lawyer fees can decimate your organization. Are your workers properly classified?

Outsourcing with an payroll or HR professional firm can save your church a lot of time and money. Most organizations with fewer than 100 people benefit from outsourcing payroll and labor law compliance and other human resource tasks to payroll or HR professionals. The alternative is risky: employees are often uninformed about and under-trained in labor law compliance. Look out! Federal fines could be in store for you. In addition, HR often falls outside an employee’s main job focus, so getting it wrong or spending valuable time away from primary tasks can cripple productivity in a small church. Get the right person trained or on your team to comply with labor laws.

When a new church is founded, there’s less need for a human resources department- you and your congregational
volunteers are your HR department. But as soon as the church grows, more employees are needed. There’s soon a realization that the HR tasks takes more time and effort than imagined. Most church leaders want to focus on growing their ministry, not spending endless hours on employment or payroll and HR issues. The issue for churches is that failure to comply with these federal and state laws can find them embroiled in unwanted IRS and state penalties, lawsuits, bad publicity, and governmental fines. And as the mantra goes… ignorance is a poor defense.

Having an payroll or HR department or a dedicated professional is typically not possible. Because of this, many churches lack the ability to know:

• which laws apply to the church, which ones do not, and why
• which existing laws are changing for the church
• how do we ensure the church is complying with the requirements of those laws
• how to avoid needless IRS audits, investigations, fines, and litigation
• how should the church set up a clergy compensation plan
• when do we withhold taxes from clergy income
• what is the correct way to handle professional reimbursements